SaaS ARR Multiple

Date created: Jul 7, 2021  •   Last updated: Jan 24, 2022

What is SaaS ARR Multiple?

The ARR Multiple in SaaS calculates the ratio between a company’s valuation and its Annual Recurring Revenue (ARR). This metric can be used to estimate the approximate value of a private SaaS company.

SaaS ARR Multiple Formula

ƒ Sum(Valuation) / Sum(ARR)

How to calculate SaaS ARR Multiple

To calculate an ARR Multiple, divide the company's valuation by the Annual Recurring Revenue for that period. For example, say a company that is worth $100M and earns an ARR of $10M. During the time of valuation, this company would have an ARR multiple of 10X.

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What is a good SaaS ARR Multiple benchmark?

The median ARR Multiple for public SaaS companies is 17X, with the 75th percentile hovering around 26X. In general, SaaS companies tend to have an ARR multiple between 4X and 9X.

SaaS ARR Multiple benchmarks

Public SaaS ARR Multiple by Quartile

Public SaaS ARR Multiple by Quartile
Tomasz Tunguz, Nov 2021
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How to visualize SaaS ARR Multiple?

SaaS valuation multiples are usually expressed as a single number. Therefore, it is best to visualize your ARR Multiple in a summary chart. This displays your data in a "metric" view where you can compare your current value to a previous period.

SaaS ARR Multiple visualization example

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SaaS ARR Multiple

9X

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0.95

vs previous period

Summary Chart

Here's an example of how to visualize your current SaaS ARR Multiple data in comparison to a previous time period or date range.
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SaaS ARR Multiple

9.03X

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0.95

vs previous period

Summary Chart

Here's an example of how to visualize your current SaaS ARR Multiple data in comparison to a previous time period or date range.

More about SaaS ARR Multiple

ARR Multiple, which divides a company’s worth by its annual recurring revenue, is mainly used to determine how a company’s ARR stacks against its valuation. Investors value companies based on multiple factors including revenue and growth. By calculating the ARR Multiple, you get a good picture of how a company has been valued based on ARR. In general, public cloud companies range between 4X and 9X.

The main reason to track a company's ARR Multiple is to understand how much a potential investor would be willing to pay or invest in the company, relative to the recurring revenue currently generated. To see how this metric grows after raising capital, track Growth in ARR Multiple since last raise.

SaaS ARR Multiple Frequently Asked Questions

What does ARR mean?

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ARR refers to Annual Recurring Revenue. Read the detailed ARR definition on MetricHQ.

How do you calculate ARR?

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ARR is usually calculated as your Monthly Recurring Revenue (MRR) * 12, which is the annualized monthly recurring revenue. Check out the detailed ARR and MRR definitions on MetricHQ for formulas, calculations, and examples.